Wireless in Canada State of the Nation 2010

FITC Mobile 2010, Toronto

Thomas Purves tom@thomaspurves.comTwitter: @tpurves

About me

2

As mobile developer what would be our ideal mobile world?

Ubiquitous broadband connectivity wired and wireless

Bandwidth seen as free by users Consistent un-fragmented mobile

platforms Mature/Useful options for monetizing

content High common-denominator of devices Ubiquity of mobile phones and of

smartphonesIt’s great if many Canadians have access

to smartphones , much better if/when you could someday assume that everyone does.

3

What is the state of Wireless in Canada?

Canada

Just 3 years ago, the picture was grim

Ouch

Circa April 2007:

Some of worst data rates in the developed world.

A country of Blackberry addicts, but low accessibility to most advanced devices.

Dominated by On-deck content, low accessibility to open content, open services.

High pricing to consumers, lagging wireless penetration, lagging adoption behaviours

Canada’s major wireless carriers 2007

6

Canada’s 2008 Spectrum Auction

New spectrum Auction rules • 40% of new spectrum set aside for new entrants• Mandated tower sharing and in-country roaming• Attempt by Government to improve wireless services

and accessibility by encouraging increased competition

Canada’s major wireless carriers 2010

8

Does this look like Competition?

9

Who is exactly zooming who

10

??

Other than branding agencies, has this mess started to help Canadians?

First, the bad news

11

Canada’s Wireless Carriers – To ScaleTotal subscribers, CWTA data Q2 2010 ( Mobiliciy, Public mobile no data)

12

New entrants have not made a big impact (yet)(CWTA Data Q2 2010, no data for public, mobilicity, videotron)

13Rogers Telus Bell Wind

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Net Subscriber Additions in 2010 (so far)

Canadians still (still!) pay the highest cell phone bills in the world

14

And that’s not a good thing

15

16

The good news

17

How the majors are competing

Brand bamboozlem

ent

18

Network Investment

Massive handset

subsidies

(not so helpful) (helpful) (mostly helpful)

What is missing from this picture?

Canada’s network advantage

19

AT&T - 3G

Sprin

t - "4

G"

Verizon - "

LTE"*

T-mobile

- HSP

A+

Rogers

HSPA+

Bell HSP

A+

Wind/M

obilicity

H...

Telus HSP

A+ *0

7.2

14.4

21.6

28.8

36

43.2

50.4

US vs Canadian Network Speeds

Rate

d N

etw

ork

Spee

d (M

Bps)

* Services announced but not yet commercially released

Some great deals on smartphones

20

More Canadians have access to smartphones

Summer 2009

60% mobile penetration

25% smartphone penetration (Rogers)

$199 entry point for high-end smartphone ( iPhone 3G w/ contract)

Summer 2010

69% mobile penetration

35% smartphone penetration (Rogers)

$79 entry point for high-end smartphone (HTC Desire, w/ contract)

21

Canadians are still paying the highest wireless fees in the world, but at leastwe are getting more for our money. That’s sort of like good news.

Your carrier is not actually a carrier, it’s a handset leasing operation disguised as a wireless carrier

22

Where o’ where your wireless bills goHST and handset subsidies cost more than building the network

23

HST; $9.56

Handset sub-sidies; $6.80

Marketing; $5.87

General over-head; $18.94

Fixed costs; $6.30

Profit; $35.63

Where Your $83 Wireless Bill Goes(Example: Rogers Q2 2010 financial results

Basically you get this year’s latest gadget in exchange for 3yrs servitude buying some data fees and a bunch of wildly overpriced minutes

Average handset subsides >$500 per new subscriber

“the competitive environment remained intense during the quarter with aggressive acquisition offers and deeply discounted handsets being featured in the market. In response to these competitor actions, we also lowered our average handset prices” -Siim Vanaselja CFO Bell

Consumers are crazy about smartphones (“if it’s not a smartphone we can’t even sell it anymore” - Rogers exec)

It’s a great way to compete against the new entrants

But, voice minutes are in decline (down 5% yoy)

24

In a world of mobile broadband, paying for voice minutes doesn’t make any sense

25

Source CISCO forecasts 2009

Rogers just announced 21MBps service in Canada (cool!)

A standard GSM voice band requires only 12.2 kpps

Notionally, that’s now less than 0.01% of your phone’s available bandwidth

How long can this traditional but tiny little bit-stream continue to support 80% of the carrier’s revenue?

With LTE *all* voice is voip, so why do you need to buy voice services from your carrier vs anybody else?

How a carrier makes it’s money today

26

~2B (Rogers adjusted operation profit) ~4B (BCE operation profit)

Pipes vs Content

27Source: Rogers Q2 financial report

Wireless ( 3.4 B Revenues) Cable ( 2.0 B Revenues)

If carriers become dumb pipes, their business would be much reduced

28

Dumb pipes

Other Fluff(voice minutes, cable subscriptions, media, publishing etc.)

Carrier operating profit (Simplified):

Looking ahead: With traditional cash cows like voice in decline, where will telcos get their new fluff from?

29

Telcos are buying up broadcasters and Big Content rights holders

Bell + CTVRogers + CityTV, Chum etc.Videotron + their own stuff

If you are an independent content producer, or into that whole net-nutrality thing, this trend is not especially helpful.

Discussion?

30